Your plan is reasonable, however the one component you really need to check, are the encoders actually encoders?
Given the age of the machine, they could be resolvers (basically the analogue predecessor to digital encoders).
You can get converters, but fitting new encoders is cheaper. A KFlop/Kanalog combo can be rigged to read resolvers, but it's not recommended, as there are a lot of variables that affect the final accuracy.

Keeping the existing servos/drives should work well as long as they all still work. They would need a controller capable of analogue +/-10V.
Some suitable controllers are-
CS-Labs CSMIO-IP/A - Requires Mach 3 or 4.
Certain Galil - Not that common for hobby use, as they are more expensive (and a bit more involved to setup)
MESA boards - Main use is for LinuxCNC.
Dynomotion KFlop/Kanalog - Can be used with Mach 3, or Dynomotion's own KMotionCNC software.

I personally prefer Dynomotion, as it's the most adaptable, but that comes at the cost of needing to know a bit about C programming. I've also ditched Mach 3 on all but one of my machines, as I got fed up with it's glitches, but the built in wizards are very good if you want to do simple machining.

However, the first thing I'd advise you to do, is create a list of all the inputs and outputs you'll require, as that will help comparing controller options.
Also think about things you may like to do, as again it's easier to plan now, than retrofit later.